Elon Musk Fires All Tesla Contractors, Unless Employees Will Personally Vouch For Them

It’s no secret Tesla is struggling, thanks to a prominent death that potentially implicated the company’s Autopilot technology and problems ramping up Model 3 production. But Elon Musk’s behavior of late has been downright bizarre. During a conference call last week, Musk insulted analysts and investors before spending ~25 minutes talking to one young retail investor on YouTube. Now, he’s apparently declared that all Tesla contractors are fired, effective immediately — unless employees are willing to put their jobs on the line to defend specific individuals and why those individuals should be retained by Tesla.

Musk has made his feelings about contractors extremely clear. During last week’s conference call, he stated: “[T]he number of sort of third-party contracting companies that we’re using has really gotten out of control, so we’re going to scrub the barnacles on that front. It’s pretty crazy. We’ve got barnacles on barnacles. So there’s going to be a lot of barnacle removal.”

An email leaked earlier, on April 17, offered some concrete detail about Musk’s thinking on contractors. In that email, Musk wrote:

I have been disappointed to discover how many contractor companies are interwoven throughout Tesla. Often, it is like a Russian nesting doll of contractor, subcontractor, sub-subcontractor, etc. before you finally find someone doing actual work. This means a lot of middle-managers adding cost but not doing anything obviously useful. Also, many contracts are essentially open time & materials, not fixed price and duration, which creates an incentive to turn molehills into mountains, as they never want to end the money train.

There is a very wide range of contractor performance, from excellent to worse than a drunken sloth. All contracting companies should consider the coming week to be a final opportunity to demonstrate excellence. Any that fail to meet the Tesla standard of excellence will have their contracts ended on Monday.

Fair enough. Maybe Tesla really does have a problem with contractors and their work output isn’t what it needs to be. But in a follow-up email, released yesterday, Musk pulled a move that can only be described as bizarre. In this latest missive, Musk states:

I extended the performance evaluation deadline to provide more opportunity to demonstrate excellence, but now time is up. Please send a note to HR before Monday justifying the excellence, necessity and trustworthiness by individual (not just the contractor company as a whole) of every non-Tesla person who has badge access to our buildings or network access to our systems.

By default, anyone who does not have a Tesla employee putting their reputation on the line for them will be denied access to our facilities and networks on Monday morning. This applies worldwide. (Emphasis added)

Consider the implications of this for a moment. First, summarily locking the doors on contractors provides no wind-down period for any you don’t want to keep to finish projects or assignments. Sudden staff departures create communication snarls and slow production as existing employees pick up the work. Second, it’s not the job of most employees to keep track of the productivity or added value of other employees. Yes, in any given office there will be people who obviously are dropping the ball and people who are truly excellent, high-value employees — but statistically, most of us fall into a middle ground.

Asking employees to put their reputations on the line over whether to keep a contractor is equivalent to asking them to put their jobs on the line to keep a specific individual employed, especially when Tesla has launched layoffs in the past year and when Musk has declared himself extremely unhappy with the contractor situation. Would you want to take a position that contradicted that of the CEO, even to save the job of someone who is important to the company? Maybe. But that’s an extremely high bar to clear, particularly given that ordinary employees are explicitly not the people who are supposed to be making that kind of decision.

Ask yourself if you’d trust your boss to risk his own career to save yours if the CEO of your company had proposed eliminating your entire department, and you’ve got a pretty good idea why this isn’t the best way to decide which contractors to keep on staff. Most people wouldn’t take that chance, and the handful of people who would might not be in a position to evaluate the value of specific individuals, either, outside the handful they personally know. Musk is assuming that every employee who knows of a critically important contractor has the temperament to stick their neck out for said contractor in a way that could be read as contrary to the CEO’s direct desires. That’s not a common characteristic or a reasonable ask and it could cause future delays to the Model 3’s already-delayed production.

Again, the question here isn’t whether Tesla had too many contractors, or if those contractors contributed useful work. Elon Musk is in a far better position to evaluate those questions than I am. The question is whether asking employees to personally vouch for the value of contractors represents an appropriate or acceptable method of ensuring that the right people are kept at the company, given that Musk has publicly stated that he wants contract workers out of Tesla. There’s a right way and a wrong way to deal with many problems, and it’s hard to see how this represents the right one. Musk could sabotage morale and cause himself further problems in the name of resolving them.By Joel Hruska